CENTRAL TRANSPORT, INC.

Doug Thomas, Managing Director of Central Transport, had just returned from a meetingcalled by Sue Purdum, President and CEO of SAB Distribution. He immediately satdown and wrote the following E-mail message to all of his senior staff.

I need your collective wisdom and input to help me respond to a challenge given to meby Ms. Sue Purdum of SAB Distribution. SAB, as you know has been one of our bestcustomers for many years. Our growth has been tied to its growth since we are one of itscore carriers. As it expanded its customer base throughout Pennsylvania and theneighboring states, we have expanded our route network to meet its requirements. Ourfounder, John Spychalkski, was a personal friend of the three founders of SABDistribution. While that personal friendship has changed with changes in both of ourorganizations, Central has maintained a partnership approach with SAB. My belief is thatif SAB wins Central wins.

SAB, according to Sue Purdum has been faced with a growing level competition bothdirectly and indirectly in the communities where its retail store customers are located. Itsprofit margins have narrowed, and Sue Purdum is under pressure from his board (most ofwhom are descendants of the three founders) to improve SAB’s profitability. To hiscredit, he initiated a number of changes after he became Vice-President five years ago.

According to Sue Purdum, he has to reduce his cost-of-sales and / or improve his level ofcustomer service to add more value to his customers. Transportation from SAB’swarehouse to its customer stores is a major part of its cost-of-sales. Also, our ability todeliver customer’s orders in a timely and reliable manner impacts significantly SAB’scustomer service.

Sue Purdum would like our senior management team to consider what we could do tohelp SAB remain competitive and improves its profitability. Obviously, we could reduceour rates by 10 % to offset the problem to us unless we can reduce our operating costs by10 % to offset the rate reduction. We need to be creative and think of ourselves as asupply chain partner with SAB and its suppliers and customers.

Help Mr.Doug Thomas develop a “white paper” to respond to Sue Purdum by addressingthe following:

CASE QUESTIONS

1. Why and how has the competitive marketplace changed for SAB Distribution? 2. Provide additional rationale for the collaborative perspective suggested by Mr. Doug Thomas. 3. Using the success factors for supply chain management as a framework, recommend what Central Transport can do to help SAB improve its efficiency